DATE OF THE CASE: 5th January, 2023
PETITIONER/APPLICANT: Tata Sons Private Limited (Formerly Tata Sons Limited)
RESPONDENTS: 1. Siva Industries and Holdings Limited
2. Mr C Sivasankaran, a resident of Seychelles
BENCH/JUDGES: Dr. D.Y. Chandrachud, C.J. and P.S. Narasimha, J.
CASE TYPE & NUMBER: Miscellaneous Application No. 2680 of 2019 In Arbitration Case (Civil) No. 38 of 2017
CITATION: (2023) 5 SCC 421: 2023 SCC OnLine SC 23
LEGAL PROVISIONS: Section 29 A[1] of the Arbitration and Conciliation (Amendment) Act, 2019
FACTUAL SCENARIO:
- In a share subscription agreement dated February 24, 2006, the Applicant, the first Respondent, and Tata Tele Services Ltd (hereafter “TTSL”) agreed to issue shares of Tata Tele Services Ltd to the first Respondent. The second Respondent is the guarantor of the first Respondent.
- A while later, the applicant, NTT Docomo Inc, a Japanese corporation, and TTSL engaged in a share subscription agreement. Docomo endeavoured to get a 26% stake in the equity shareholding of TTSL by means of a combination of primary and secondary shares.
- Docomo obtained equity shares from the first respondent, and both parties entered into a Shareholders’ Agreement to formally document the terms and circumstances of their agreement. Furthermore, a mutually agreed upon Inter se agreement was entered into, imposing an obligation upon the respondents to acquire shares in Tata Tele Services Ltd in a proportionate manner, in the event that Docomo chose to exercise its sale option.
- In July 2014, Docomo exercised its selling option and sent a sale notice to the applicant. A disagreement emerged between the two parties, resulting in the initiation of arbitration proceedings. Following the Tribunal’s ruling in Docomo’s favor, the applicant was obligated to pay the awarded damages to Docomo and purchase the TTSL shares.
- A request for the first respondent to carry out its obligations under the Inter se agreement was then made by the applicant. The second respondent, being the guarantor, consented to take on responsibility towards the applicant as set out in the Inter se agreement in case the first respondent failed to meet its commitments. The petitioner commenced arbitration proceedings against the respondents. The respondents refrained from naming their chosen arbitrator, prompting the applicant to submit a petition to the Supreme Court seeking the establishment of an arbitral tribunal.
- In this matter, the Supreme Court proposed Mr Justice S N Variava as the sole arbitrator, and the parties agreed. The arbitrator commenced the pleadings on February 14, 2018, and subsequently conducted a preliminary hearing. During this meeting, the parties reached a mutual agreement to extend the time limit for the resolution of the arbitral proceedings by an additional six months. The time limit for award delivery has been extended to August 2019.
- In the meantime, IDBI Bank Ltd filed for insolvency proceedings under the IBC, 2016 against the first respondent. The initiation of the Corporate Insolvency Resolution Process (CIRP) by the NCLT resulted in the imposition of a moratorium on all actions against the first respondent, which included a pause of arbitral proceedings.
- The petitioner submitted a Miscellaneous Application requesting an extension of the tribunal’s authority until the moratorium imposed under the Insolvency and Bankruptcy Code was lifted. The application’s hearing was postponed by an order from this Court on 7 January 2020 due to the prevailing conditions at the time.
- The first respondent was released from the demanding procedures of the CIRP on 3 June 2022. A request for an interlocutory application had been submitted on behalf of the applicant, asserting that the amendment of Section 29A of the Arbitration and Conciliation Act, 1996 necessitates the automatic continuation of the arbitration procedures.
LEGAL ISSUES:
Whether international commercial arbitration falls under the ambit of the amended Section 29A?
Whether the amended 29A would apply prospectively or retrospectively?
CONTENTIONS:
Petitioner’s Arguments:
- International commercial arbitration is no longer subject to the 12-month deadline for rendering an award from the conclusion of pleadings, as that deadline has been removed in an amendment to Section 29A in 2019.
- Since the amendment is procedural in nature, it has been argued that it should be applied to the current arbitral proceedings.
- The applicant has also argued that the sole arbitrator should be given more time to finish the arbitration procedures if this Court determines that the revised requirements of Section 29A do not apply to the current arbitration.
Respondent’s Arguments:
- The second respondent argued that international commercial arbitration does not fall beyond the scope of Section 29A after the amendment was made in 2019.
- According to the second respondent, there is no legislative time limit for international commercial arbitration proceedings if the applicant’s suggested interpretation of Section 29A is adopted.
- In instances not regulated by an arbitral institution, such as the present, the second Respondent argued that the legislation did not intend for the court to have no influence over the time frame of arbitral proceedings. The period of time an arbitration takes should not be entirely up to the arbitral forum’s discretion, especially when the procedures are controlled by Indian law and held in India.
RATIONALE:
After the 2015 Amendment to the Arbitration and Conciliation Act, Section 29A[2] of the law required that all awards in commercial arbitrations be issued within twelve months of the arbitrator’s appointment. This applies to both domestic and international arbitrations. If the award is not issued within this time limit, the arbitrator’s power to do so expires unless the court grants an extension.
However, a recent amendment to Section 29A sub-section (1) clarifies that the twelve-month timeframe does not apply to international commercial arbitrations. Instead, the language suggests that the award should be issued “as expeditiously as possible“. This means that while there is no specific time limit for international commercial arbitrations, the decision should still be made within a reasonable timeframe.
On the other hand, domestic arbitrations are not limited to the twelve-month timeframe. The amendment does not affect the time limit for domestic arbitrations, allowing for more flexibility in issuing the award.
Overall, Section 29A sets a general requirement for the timely issuance of awards in commercial arbitrations, with specific considerations for international and domestic cases. The amendment clarifies the distinction between the two types of arbitrations and provides more flexibility for domestic cases.
Now to deal with the second issue in the case, it is often assumed that procedural laws possess a retrospective nature unless there exists explicit evidence to the contrary.[3] The absence of any provision in the 2019 Amendment Act suggesting prospective application is noticeable. The change is intended to be remedial in its nature, with the objective of addressing the issue of the application of the timeframe to international commercial arbitrations. The aforementioned provision does not provide any additional rights or obligations. Hence, it is imperative that the aforementioned provision be deemed relevant to all ongoing arbitration cases as of August 30, 2019.[4]
On its whole, the amendment made to Section 29A effectively encompasses the exclusion of international commercial arbitrations from the obligatory time limitations, providing a greater degree of freedom in the process of rendering judgments. The retrospective application of the amendment to all outstanding arbitrations is recommended, with the single arbitrator being granted the discretionary power to provide extensions as necessary while maintaining an efficient and timely procedure.
DEFECT OF LAW:
The revised Section 29A, pertaining to the timeframe for arbitration procedures in India, was implemented in accordance with the suggestions put out by Committee[5] led by Justice B N Srikrishna. In order to assess the functioning and efficacy of the arbitration framework in the country, a special committee was formed. In its findings, the committee addressed why international commercial arbitrations should not be subject to the strict twelve-month period mandatory in domestic arbitrations.
The committee discovered that international arbitration organizations expressed their disapproval of the court’s imposition of time frames. These institutions held the belief that arbitral institutions have their own methods for processing matters and hence did not see it necessary to involve the court in establishing timetables. In many legal jurisdictions, the determination of timelines for arbitral processes often rests upon the mutual agreement of the involved parties, taking into consideration the specific characteristics and intricacies of the dispute at hand.
After hearing complaints from arbitral institutions about the court getting involved in extending deadlines, the lawmakers revised the statute to exclude international commercial arbitrations from its obligatory time limitations.
INFERENCE:
The Supreme Court in the present case ruled that Section 29A is not applicable to international commercial arbitrations, since they are regulated by a distinct set of rules and regulations. The Court made an observation that the imposition of a strict time constraint on intricate cross-border issues will impede the efficacy and quality of arbitration, hence diminishing India’s standing as a state that is supportive of arbitration. In my opinion, The aforementioned ruling is a positive development in advancing India’s position as a center for global arbitration and upholding the principles of party autonomy and flexibility in dispute resolution.
Anumay M. Sethi
Vivekananda Institute of Professional Studies, GGSIPU
[1] Arbitration and Conciliation (Amendment) Act, 2019, § 29A, No. 33, Acts of Parliament, 2019 (India)
[2] Arbitration and Conciliation (Amendment) Act, 2015, § 29A, No. 3, Acts of Parliament, 2016 (India)
[3] Jose Da Costa and Anr. v. Bascora Sadasiva Sinai Narcornim, (1976) 2 SCC 917; Gurbachan Singh v. Satpal Singh (1990) 1 SCC 445; Rajendra Kumar v. Kalyan (D) by Lrs, (2000) 8 SCC 99
[4] ONGC Petro Additions Ltd. v. Ferns Construction Co. Inc., OMP (Misc) (Comm) 256/2019
[5] ‘High Level Committee’ chaired by Retired Judge B N Srikrishna, Supreme Court of India, July 30, 2017